Published: Fri, October 06, 2017
Technology | By Russell Knight

UPS, FedEx stocks fall as Amazon moves further into delivery space

UPS, FedEx stocks fall as Amazon moves further into delivery space

Bloomberg News reported on Thursday that Amazon is trying out a new delivery program called "Seller Flex" where the company will pick up packages from third parties selling on its platform and deliver the products to consumers.

"We are using the same carrier partners to offer this program that we've used for years, including UPS, USPS and FedEx", said Amazon spokeswoman Kelly Cheeseman in an email to CNNMoney about the Bloomberg report.

Shares of FedEx and UPS feel 2.2% and 3.3% respectively in premarket trading in NY on Thursday. Specifically, it is dabbling in a program created to make more products available for free two-day delivery and relieve overcrowding in its warehouses, according to Bloomberg.

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Speaking on the possibility that Amazon could squeeze these companies out, UPS CEO David Abney told CNBC in December that he doesn't think that's the case because "we have this huge infrastructure, we're investing in technology, we have a great mutual relationship with them".

He also pointed out UPS and FedEx's strong stock growth. The Dow, S&P 500 and Nasdaq all hit new record highs once again. This is not good news for the likes of FedEx Corp. After all, Amazon is by far the e-commerce leader accounting for an estimated 40% of online sales in 2016. It did not indicate how the deliveries would be handled and by what type of service.

While FedEx and UPS don't disclose what percentage of revenue comes from Amazon, their exposure is below 10%, according to company representatives and analysts. Another reason is that it gives the company more control over deliveries.

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The fear, of course, is that Amazon can-with one decision-completely disrupt any industry it sets its sights on.

With the option of handling more deliveries on their own, that would provide Amazon more flexibility and control while allowing the company to save money.

And a year ago, Amazon struck deals with cargo freight airlines Atlas Air Worldwide and Air Transport Services Group.

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It's important to remember that Amazon is not the only e-commerce game in town. And they will still need FedEx and UPS to deliver for them.

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